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Clearing through the Haze

The emergence of Cannabusiness

By Hattie Martin

The emergence of Cannabusiness

Technically, this has been a long time in the making. Oregon was the first state to decriminalize marijuana in 1973, California first legalized medical marijuana in 1996 and Colorado and Washington led the charge in legalizing recreational marijuana in 2012. Fast forward to November 8th, 2016 where 8 out of 9 measures to legalize some form of marijuana (recreational or medical) passed – and by a long margin in most states. All counted, nearly one quarter of U.S. residents now live in a state with legalized recreational marijuana[1]. Today there is an estimated legal market size of $5-7 billion; however, some estimates place underlying demand countrywide upwards of $50 billion[2]. And it’s “high” time we look closer at the market implications.

[1] Based on 2015 U.S. Census Data
[2] Euromonitor: The Legal Cannabis Industry in the U.S.


Category development

Despite how quickly this train is chugging along, the marijuana industry is still in the early stages of development. And as with any other emerging category, we have to consider how maturation and expansion will impact brand development and growth. Economics 101 tells us that price will continue to drop as supply catches up with demand. And as marketers, we know that when price drops, the risk of commoditization increases.

Vitamins and supplements are a key example of this.In a category where Vitamin C is Vitamin C, consumers default to price-based decision making and the biggest challenge for marketers is figuring out how to convince consumers that their Vitamin C is better than other Vitamin C.

Marijuana brands will ultimately be faced with the same task of establishing meaningful brand purposes, RTBs and differentiated offerings as a Purple Haze becomes just a Purple Haze. Forming a strong brand identity early will be critical in establishing loyalty as the competition gets fiercer.

You’re either with MJ or against MJ

One thing that makes marijuana such a formidable force in the market is its ability to stretch across a broad spectrum of categories: smoke-ables, vape-ables, edible treats, sodas, pills, drops, bath soaks, sensual enhancement oils, pet care – just to name a few that were more readily available in dispensaries.

In fact, it’s estimated that nearly half of all recreational marijuana sales come from infused products that deliver against more than just the THC fix.[1] This makes marijuana one to watch for categories that sit alongside, as they struggle to determine the impact that greater accessibility to legalized marijuana will have on their own business. Suddenly snacks, beverages, alcohol, smoke-ables and other categories operating in ‘wind-down’ occasions, ‘uplift’ needs and ‘me time’ moments have a new set of complimentary products, competitors, rituals and influencers to consider. You can no longer fully understand the risks or opportunities to your business unless you’re taking the emergence of marijuana into account.

[1] Bloomberg: Edible Weed May Be Half of the $5.4 Billion Pot Business (February 4, 2016)

Experiential evolution
During a recent trip to Denver, I spent some time trolling the local dispensaries. I was taken aback by how upscale they were. While current regulatory measures dictate how far dispensaries can currently take their customer experience, as laws continue to evolve it’s not too far-fetched to assume that this may change – shifting from more medicinal to lifestyle. After all, Denver was recently the first city in the U.S. to allow marijuana in bars and restaurants.[1] The implications here build upon the need for dispensaries to take a closer look at the consumer experience and drive penetration via appealing, socially safe spaces.

Dispensaries may have the ability to grow beyond the glass window and waiting area to become more of an immersive experience - garnering not only greater share of wallet for consumers, but greater share of time. And if they’re spending this time in a dispensary, it’s time they aren’t spending in a Starbucks, a spa or a mall. The answer may not be as simple as offering a Venti Sativa with a macchiato, but at a minimum QSR retailers will need to determine how to future-proof their experiences.

[1] Denver Prop 300

Regardless of political or moral feelings toward the legalization of marijuana, it’s emerging as a major category in the U.S. and it’s challenging the status quo of others.

In recent months, we’ve actively included marijuana consumers in research on parallel categories – ensuring our clients have the full (sometimes hazy) picture. We’re fascinated by this rapidly evolving category and what it means for some far more established markets.

Get in touch if you’d like to discuss the opportunities and challenges for your brand. 

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